[Calc Review] Help me analyze this deal

4 Replies

It's a solid "maybe", depending on your goals.

Nothing about it is terrible, but nothing about it is great either.  It looks like you take a cash flow loss in the beginning, but potential for appreciation and loan amortization make it possibly attractive in the long-term, if market growth persists. 

The basic fact is you're tying up $185,000 of capital in a down payment that doesn't achieve a very sizable return until around year 6 or 7, and that's ignoring any economic down turns.  If that's okay with you, go for it.  Otherwise, keep shopping.

What's your goal and your timeline?  We can give better advice when we know what you're trying to accomplish and how much time you've got to get it done.

@Zachary Bellinghausen - From a quick look, you need to add water/sewer and lawn maintenance to your expenses. I also looked at some of the recent postings and it seems they have advertised to a lot of section 8 tenants and in their marketing promise they "Can Get You Automatically Approved" which is a red flag. Section 8 is not necessarily a bad thing but I'd definitely look at their rent roll and a 12 month operating statement. But more importantly than all that, it seems that the area is really not great. A quick look on zillow looking at their units show many of their tenants staying less than a year along with high turnover. Median household income in that particular subsection is just over $19k which is REALLY LOW! I would run from a deal like that. If you choose to pursue this, I think you need to factor in evictions into your numbers and a higher vacancy rate. 

@Erik W.

I really do not have a specific timeline. I have been searching for a few months in the central Florida area and have to admit, it is daunting. People buy at prices that do not make sense. I will not buy until it makes sense for me. I was not going to buy this property as it is in a terrible area of town and costs associated with the tenant pool would be very high in my estimates. I was trying to get the response of the BP community towards it. I do not plan on flipping any potential property and would just buy for the cashflow and appreciation. I would like to get as close to 11% coc as I can.

@James Allen

Hi James, I had the same thoughts on the area. Disorder in front of most the units on the property when I snooped around last week. Pitbulls kenneled behind one of the buildings. Lawn care lacking, and general sloppiness of the entire property. A local PM told me he charges 15% or more to manage in that specific area and told me turnover would be high. The rent of "$800" seemed high for the same $800 cold get a better unit in a better area. It would be a good one to loose a bunch of money in my opinion. Thanks for the feedback. Do you invest in central Florida?

@Zachary Bellinghausen - No problem. I don't generally invest in central florida, I'm pretty honed in on Knoxville, TN at the moment. Although I did do one deal about 18 months in Ocala, FL but that was a one off. Glad to hear you're not moving forward on this one. That's a good call on your part.